Credit risk is eliminated because I Bonds are issued by the U.S. Treasury. As the saying goes, if the Treasury doesn't honor its debts, we have bigger problems to worry about. And inflation is covered because every 6 months there is an inflation adjustment based on the CPI-U.
One drawback is that individuals can only buy $10,000/year outright, although an additional amount up to $10,000 can be bought with a tax refund.
I Bonds are 30-year issues that have to be held at least 1 year. After that, up to 5 years, if redeemed, the holder pays a penalty of 3-months' interest. After 5 years, there is no penalty.
How Yield is Calculated
The yield is comprised of 2 components: a fixed part that stays fixed for 30 years, and an inflation component that changes every 6 months from the purchase date. The fixed part now is 0%. The inflation component is obtained from the CPI-U. The next inflation component adjustment will be in November. The CPI-U index in March was 229.392. If the September index is unchanged from the August 230.379 level, the rate set in October will be .86% ((230.379/229.392)-1*100 *2= 0.86).
Importantly, the yield cannot go negative if the U.S. enters a period of deflation.
Where to Buy
|Source: Treasury Direct|
At the site, click on the link indicated on the left graphic to get at I Bond info. The information will explain that the bond you buy will be electronic. You'll find that you can buy paper bonds with a tax refund by using IRS form 8888. You can also set up a payroll deduction.
You'll find, as well, that these bonds cannot be bought through brokers or banks.